The Sordid History of ACORN and the Ties to the Financial Meltdown

Stanley Kurtz has a great article detailing the history of ACORN and its ties to the financial meltdown. Here is the Cliffs Notes version of his work

• ACORN intimidated banks into making high-risk loans to low-credit customers using provisions of the 1977  Community Reinvestment Act (CRA). Chicago ACORN was able to delay and halt the efforts of banks to merge or expand until they had agreed to lower their credit standards and to obtain “counseling” compensation.
• Heidi Swarts, a strong supporter of ACORN and author of Organizing Urban America, notes that ACORN members think of themselves as “militants unafraid to confront the powers that be” and ACORN protesters break into private offices, show up at a banker’s home to intimidate his family, or pour protesters into bank lobbies to scare away customers, all in an effort to force a lowering of credit standards for poor and minority customers.
• The 1977 Community Reinvestment Act forced banks to increase lending in poor and minority neighborhoods, but its exact requirements were vague and open to interpretation. Bank mergers or expansion plans were rarely held up under CRA until the late 1980s, when ACORN perfected its technique of filing CRA complaintsand intimidated representatives of banks.
• A provision of the 1989 savings and loan bailout pushed by Democratic legislators, like Joseph P. Kennedy, required lenders to compile public records of mortgage applicants by race, gender, and income.  The statistics produced by these studies were presented in highly misleading ways and groups like ACORN were able to use them to embarrass banks into lowering credit standards.
• IN 1991, House Democrat Henry Gonzales had announced that Fannie and Freddie had agreed to commit $3.5 billion to low-income housing in 1992 and 1993, in addition to a just-announced $10 billion “affordable housing loan program” by Fannie Mae.
• A mere month later, ACORN Housing Corporation president, George Butts made news by complaining to a House Banking subcommittee that ACORN’s efforts to pressure banks using CRA were still being hamstrung by Fannie and Freddie. Butts also demanded still more data on the race, gender, and income of loan applicants. Many news reports over the ensuing months point to ACORN as the key source of pressure on congress for a further reduction of credit standards at Fannie Mae and Freddie Mac. As a result of this pressure, ACORN was eventually permitted to redraft many of Fannie Mae and Freddie Mac’s loan guideline.
• In the Clinton administration, Clinton Housing Secretary Henry Cisnersos pledged to meet monthly with ACORN representatives.
• At this point, both ACORN and the Clinton administration were working together to impose large numerical targets or “set asides” (really a sort of poor and minority loan quota system) on Fannie and Freddie. ACORN called for at least half of Fannie and Freddie loans to go to low-income customers. At first the Clinton administration offered a set-aside of 30 percent.
• In early 1994, the Clinton administration floated plans for committing $1 trillion in loans to low- and moderate-income home-buyers, which would amount to about half of Fannie Mae’s business by the end of the decade.
• In June of 1995, President Clinton, Vice President Gore, and Secretary Cisneros announced the administration’s comprehensive new strategy for raising home-ownership in America to an all-time high. Representatives from ACORN were guests of honor at the ceremony. In his remarks, Clinton emphasized that: “Out homeownership strategy will not cost the taxpayers one extra cent. It will not require legislation.” Clinton meant that informal partnerships between Fannie and Freddie and groups like ACORN would make mortgages available to customers “who have historically been excluded from homeownership.”
• At both the local and national levels, then, ACORN served as the critical catalyst, levering pressure created by the Community Reinvestment Act and pull with Democratic politicians to force Fannie Mae and Freddie Mac into a pattern of high-risk loans.

In addition to Stanley Kurtz’s work, Michelle Malkin has more on this on her site.

Deregulation Argument is Nonsense

Liberals have been arguing that the root of the financial crisis is the repeal of the Glass-Steagall Act of 1933 by the passage of the Gramm-Leach-Bliley Act which they allege led to masssive deregulation which they say caused the mortgage crisis. We, on the other hand track this mess back to the Carter Administration and the Community Reinvestment Act which forced lending institutions to lend “equitably” to those in their communities. The lending standards were lowered during the Clinton administration. Sebastian Mallaby writes in WaPo 

The key financiers in this game were not the mortgage lenders, the ratings agencies or the investment banks that created those now infamous mortgage securities. In different ways, these players were all peddling financial snake oil, but as Columbia University‘s Charles Calomiris observes, there will always be snake-oil salesmen. Rather, the key financiers were the ones who bought the toxic mortgage products. If they hadn’t been willing to buy snake oil, nobody would have been peddling it.

Who were the purchasers? They were by no means unregulated. U.S. investment banks, regulated by the Securities and Exchange Commission, bought piles of toxic waste. U.S. commercial banks, regulated by several agencies, including the Fed, also devoured large quantities. European banks, which faced a different and supposedly more up-to-date supervisory scheme, turn out to have been just as rash. By contrast, lightly regulated hedge funds resisted buying toxic waste for the most part — though they are now vulnerable to the broader credit crunch because they operate with borrowed money.

This Will Disgust and Amaze You